James North-Hearn, boss of Backbone parent company Foundation 9, told Gamasutra the studio's problems were the result of "a lower demand for conventional console development".

North-Hearn declined to specify the number of layoffs, but insisted the developer will continue to operate at a reduced size and will honour its commitments to existing partners. It had been rumoured that Backbone may be forced to close.

"Due to a lower demand for conventional console development, the studio has made some difficult but necessary adjustments in both its capacity and services, with the goal of matching the changing needs of today's market," North-Hearn said.

Backbone's most recent projects were Dance Central 3, which it helped create, and Midway Arcade Origins, a compilation for Warner Bros., which declined to comment when contacted by Eurogamer last night. Perhaps its highest-profile project was Super Street Fighter 2 Turbo HD Remix, which released in 2008 for PSN and XBLA.

"I would like to publicly thank the departing members for their incredible service to the company," North-Hearn continued. "All of us at Foundation 9 are sorry to lose them and we're here to help them to a soft landing. We wish them well in their individual pursuits."